Lesotho inflation tops SACU region

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Bereng Mpaki

LESOTHO’S year-on-year inflation rate during the month of June 2016 was the highest in the South African Customs Union (SACU) region.

According to SACU’s monthly inflation report for June 2016, Lesotho and Swaziland had an annual inflation rate of 7.5 percent, which is the highest among the five member states.

SACU is the world’s oldest customs union and consists of Botswana, Lesotho, Namibia, South Africa, and Swaziland.

The inflation rate is the level at which prices of goods and services is rising and, consequently, the falling of the purchasing power of a currency. The inflation rate is vital for purposes of economic policy-making, especially the conduct of monetary policy.

“The highest annual inflation rate among the member states was registered in Lesotho and Swaziland both at 7.5 percent followed by Namibia at 6.7 percent, and South Africa at 6.3 percent, while Botswana continued to record low inflation rate at 2.7 percent in June 2016,” reads the report.

“All member states continued to record a single digit annual inflation rate during the month of June 2016.”

The report revealed Lesotho’s inflation rate was measured at 2.9 percent in June 2015.

“The acceleration in the annual inflation rate between June 2015 and June 2016 was mainly reflected in food and non-alcoholic beverages (13.8 percent up from 4.7 percent in June 2015) that accounts for 38.1 percent of the overall inflation basket.”

SACU also noted the member states’ annual inflation rates continued to be above the inflation target range of three to six percent with the exception of Botswana.

The report attributed the inflationary pressure on food prices to the prevailing drought in the region.

“For the month of June 2016 it was further observed that the food and non-alcoholic beverages category continued to register a double figure inflation in member states with the exception of Botswana. The inflationary pressure in food prices can be attributed to the prevailing drought in the region.”

SACU also stated that by the end of June 2016, the monetary policy stance in member states remained generally accommodative with the repo rate or bank rate ranging between six and seven percent. A repo rate is the rate at which the central bank of a country lends money to commercial banks in the event of any shortfall of funds. It is used by monetary authorities to control inflation.

“The monetary stance was unaltered between May 2016 and June 2016 in all member states. During the month of June, the highest prime lending rate was observed in Lesotho at 11.69 percent, followed by Namibia at 10.75 percent, South Africa at 10.5 percent, Swaziland at 10.5 percent, and Botswana at 7.5 percent.”

 

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